In attempting to close the projected budget deficit in Providence – estimated at about $50 million for the fiscal year that started July 1 – Mayor David N. Cicilline has officially asked the city’s nonprofit hospitals and universities to do their “fair share” by increasing fee payments to the city, notwithstanding their status as tax-exempt property owners.
And two bills in the General Assembly could allow Cicilline to collect those fees.
The added revenue could go a long way toward closing that deficit, Cicilline said.” It would range in an infusion of anywhere from $6 million to about $20 million of revenue to the city,” he said in a recent interview, “depending on whether the assessment or impact fee is related to hospitals and universities or just universities.”
Instead of paying an annual property tax on their valuable Providence property, the four universities based in Providence are voluntarily paying the city about $48 million over a 20-year period. But that sum – etched in a payment-in-lieu-of-taxes (PILOT) deal with Cicilline in 2002 – could soon be changed to an involuntary payment, Association of Independent Colleges & Universities of Rhode Island President Daniel P. Egan said recently.
Cicilline’s plan could require the four largest universities in Providence – Brown University, Johnson & Wales University, Providence College and the Rhode Island School of Design – to pay fees and a portion of their taxes. That legislation, Egan said, would in essence invalidate the 2002 agreement.
One of the bills would allow any municipality to impose a “Fair Share Impact Fee” on any university or hospital that owns property worth more than $20 million in that municipality. That fee would be less than 25 percent of what would be the taxes on that property.
That bill could affect all eight of the state’s universities and many of its hospitals.
Hospital Association of Rhode Island President Edward J. Quinlan said the hospitals that he represents “are concerned that this legislation would alter the historic role and mission of nonprofit organizations, such as hospitals and universities, in our state. … It sends a very negative signal.”
Quinlan added that while almost every city and state in the country is experiencing a difficult time, many of the universities and hospitals are having similar troubles.
The city’s hospitals don’t have a PILOT deal with the city like the one the universities have, Quinlan said, but offer a service that’s unique to their segment of the economy. “In Rhode Island, hospitals essentially represent the public safety net,” he said, adding that the uncompensated care offered by Rhode Island hospitals this year will exceed $150 million. That’s been growing at a rate of about 5 percent annually.
“We are more than assuming our fair share,” Quinlan said.
The second bill being championed by Cicilline would assign a $150 fee per student, per semester to the city’s universities. The fee would be paid by the schools and wouldn’t apply to students with Rhode Island residency. The bill has some traction – House Majority Leader Gordon Fox and House Finance Chairman Steven Costantino were both on hand with Cicilline to announce it on May 20 – and as of early July had passed the House Finance Committee.
Cicilline said those two bills could still be passed, even though the legislature is in recess and has finished most of its business for the year.
Larry Berman, spokesman for House Democratic leadership, said the bill on student-impact fees, sponsored by Fox, will still be “in play” when the House returns from its recess. A vote on the tax-exempt-property bill is less likely because it hasn’t been passed by the House finance panel yet, he said.
A 2008 report by the R.I. Senate – which last year mulled a bill that would have eliminated the tax-exempt status – showed that tax-exempt city property is worth $7.8 billion and, at Providence’s commercial tax rate of $26.99 per $1,000, it would account for about $211 million in annual taxes.
The two largest groups are the nonprofit hospitals – Butler Hospital, Miriam Hospital, Rhode Island Hospital, Roger Williams Medical Center, St. Joseph’s Hospital and Women & Infants Hospital of Rhode Island – and the nonprofit higher education institutes – Brown, J&W, PC and RISD. Those groups’ tax-exempt property is worth $1.3 billion and $1.6 billion, respectively, according to the report.
Cicilline said the nonprofits would pay $88 million in taxes if they weren’t exempt. The exemptions were originally granted when the nonprofits each had only a few buildings and were “confined to a certain area. That’s certainly changed,” he said.
“I’m not suggesting they pay full taxes,” Cicilline added. “I am suggesting they do more than they’re currently doing.”
One of the biggest arguments from the universities has been the cultural and economic growth that’s inherent in having high-quality higher education in a city.
That’s present in small startups like Andy Tower and Mike Bulman’s HB LLC, a design firm. The two RISD architecture graduates started the company after they graduated two years ago and have been fairly successful.
“It just made sense” to stay in Providence, Tower said.
Cicilline added that there is “no question” that the city would be a very different place without the universities and hospitals within its borders. “At the same time, they have a responsibility to share in the costs of services that are provided,” he said.
But at the heart of the argument, both Quinlan and Egan said, is that the “fair share” legislation would disrupt the nonprofit status and mission of the entities that they represent.
“We believe our nonprofit status more than adequately reimburses or pays for any services that we gain in the city of Providence,” Egan said.
There is also a question of whether Cicilline’s push to collect a per-student fee in the city is really a push to bring the heads of higher education back to the bargaining table. Egan said the proposal for such a fee is “usually the precursor to a memorandum of understanding or a PILOT agreement, which we currently have.”
That agreement was made when the city had a $60 million budget deficit, Egan said, adding, “Fast forward five years and the city has a $50 million deficit again.” •
